Mr. Chairman, I offer an amendment. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, the purpose of the amendment that I am offering tonight along with the distinguished gentlewoman from Michigan (Ms. Kilpatrick) and…
Mr. Chairman, I offer an amendment.
Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, the purpose of the amendment that I am offering tonight along with the distinguished gentlewoman from Michigan (Ms. Kilpatrick) and the gentlewoman from Connecticut (Ms. DeLauro) is to decrease funding for very ill-considered and heavy-handed IRS enforcement effort that tries to precertify working poor families for the earned income tax credit or the EITC.
The amendment we are proposing will reduce funding by $75 million for the IRS's precertification proposal and it would in turn increase funding by $75 million for investigation and audit of large and mid- size corporations. The amendment would continue to allow $25 million for implementation of the precertification program.
I certainly understand the Treasury's concerns about high error rates associated with the EITC. And as a proponent of good government, I am eager to reduce any waste, fraud or abuse in government. But the Treasury's proposal will create, probably, an even more burdensome bureaucracy than they realize, and it is a clumsy and heavy-handed attack on the poor.
Even the IRS realizes this because in a recent announcement they decided to delay and decrease their precertification program. EITC compliance accounts for about 3 percent of the estimated total taxes that go uncollected, about 3 percent. But in contrast, according to the General Accounting Office, individuals who under report business income on their taxes are defrauding the government by about $40 billion a year or about 12 percent of uncollected taxes, more than the cost of the entire EITC program. Yet, guess what? There is no major effort to target these taxpayers even though it is a much larger amount.
I suggest we follow the Willie Sutton rule, the famous bank robber, who when asked why he robbed banks, he said, ``That's where the money is.''
Instead, the IRS has requested a 68.5 percent increase in EITC enforcement while barely increasing their other enforcement efforts. In my mind, this represents a gross misallocation of resources, especially in view of declining overall tax enforcement by the IRS.
I am willing to bet that the administrative costs of precertification will far outstrip any potential savings, especially if the IRS goes forward with the plans to eventually expand the precertification process to as many as two million taxpayers. That is why our amendment would direct $75 million toward much more sensible and cost-effective compliance efforts, where the money is, toward auditing and investigating mid-size and large corporations. Because according to the IRS, 7,000 corporations that should be audited every year are not. This translates into a direct loss to the Treasury of $6.5 billion a year in tax revenues.
Moreover, according to a recent report by former IRS Commissioner Rossotti, the IRS lacks the resources to carry out nearly a third of the corporate audits it should be accomplishing each year.
So why is the administration focusing on the few dollars of poor working families under the EITC and not on the big dollars of these companies? Why is the U.S. Government trying to make this vital tax credit so hard to claim? I am afraid the real IRS motive may not be just a desire to curb waste, fraud and abuse. It may be gross insensitivity to the needs of working poor families, simple hard- heartedness and lack of compassion for these hard-pressed American families.
In the national metropolitan area which makes up the heart of my congressional district, approximately 14 percent of my constituents rely on the EITC every year, receiving a credit of about $1,500. In total, this credit puts about $87 million a year into these families and into the national economy. Nationally, the EITC is directly responsible for lifting some four million people every year above the poverty line, including two million children. Precertification programs, as proposed by the IRS, will discourage many of these families from even applying for the EITC.
Under the precertification proposal, the IRS now says it will now want to prove that children claimed under the credit have been living with the claiming taxpayer for the required six months. The practical obstacles posed by this requirement are mind boggling. Although the IRS would allow a landlord or property manager to submit an affidavit, what landlords would testify on penalty of perjury to the intimate living arrangements of their tenants? Neighbors and relatives who are, in fact, in the best position to know these arrangements, are forbidden under the IRS approach from providing supporting documentation.
I also object to the discriminatory treatment of lower income tax payers that would result from precertification. For those subject to the process of precertification, this effectively means a 100 percent chance of
audit in advance of even filing your tax return. No other taxpayers in America face a comparable burden. Why is the IRS not also demanding precertification for taxpayers claiming credits for dependent care expenses, educational expenses, or charitable contributions? There is significant evidence that these credits are a widespread source of exaggeration and noncompliance and abuse, yet no one is requiring these other taxpayers to file receipts in advance for day care expenses or donations of such things as used automobiles or clothing.
I fear that rather than reducing errors, the IRS proposal would, in fact, intimidate people into not using the EITC at all, and that would be a severe injustice to these people.
Mr. Chairman, I reserve the balance of my time.
Mr. Chairman, I yield myself such time as I may consume.
The gentleman from Oklahoma has been quite unfair in his characterization, first in the nature of the amendment. We drafted this with the advice of the Parliamentarian as the only way to affect this important area in the bill without being subject to a point of order. I think the gentleman really thinks a more explicit amendment would have been subject to a point of order, which is exactly what the gentleman from Oklahoma would have preferred.
Second point, picking on poor people. If my colleague is going to do it, at least be fair about it. Remember, under this bill we would still allow $25 million to be spent to implement the IRS precertification. Remember, again, that even the IRS has admitted that their prior efforts have gone too far because they, IRS, on their own initiative has delayed and canceled their program because even they have realized they were insensitive to the needs of these families.
Another mischaracterization, the program was put into place, as I recall, years ago before my time by a Republican President, and I think it was Richard Nixon, because he and many Americans realized the detrimental effect of a high marginal rate of taxation. As a person works and moves out of poverty, they are subject to an extraordinarily high and punitive tax
rate. The EITC is designed to bring that back to a decent, bearable level for these hardworking families.
So it is basically a Republican program we are talking about here. No one wants it to be abused. But I would suggest to the gentleman that there are other, fairer ways to police this program, and guess what, this and prior Congresses have already thought up several of them because, guess what, the study that the gentleman cited about waste or abuse in the program is from a 1999 study, and this Congress has already implemented several reforms to improve administration of this program. No study has been conducted since 1999. So let us at least find out the true facts before we jump to conclusions, especially when at the same time we are jumping on the backs of the poor.
This is an important opportunity to balance IRS enforcement, to allow the IRS to go where the money really is. As I mentioned, the average recipient in my district, at least of this money, gets $1,500. There are many other places the IRS could go to really retrieve big dollars for the taxpayer. The IRS has listed them. We are allowing $75 million to go help the IRS in these efforts while we still preserve $25 million for this precertification program.
So if the gentleman were more careful with his facts and more sensitive to the needs of the working poor, he would not simply dismiss this as a public assistance program. This is an example, if my colleague wants to use it, of compassionate conservatism, but unfortunately in this Congress we are seeing very little compassion.
Let us have some compassion for the working poor, and this amendment is an opportunity to show it.
Mr. Chairman, I yield 5 minutes to the gentlewoman from Michigan (Ms. Kilpatrick).
Mr. Chairman, I yield myself such time as I may consume to note once again that my friend, the gentleman from Oklahoma, is being unfair. We are not trying to stop enforcement of EITC. We are trying to do it in a fair and balanced way so that the IRS can go after where the big money is as well as where the small money is.
And the gentleman is unfair as well because it is not just a little bit of paperwork. They have to find folks who will certify that their own children have been living with them for 6 months, and they disqualify relatives and neighbors and building managers. So who else can they turn to, people who do not know them? And under penalty of perjury, they want an absentee landlord to sign a piece of paper saying someone's kids have been living with them? Why not a simpler approach? Why not say, in the situation of a divorce or legal separation, why not go to the court and find out who has custody of the children and get a certificate there and make that work? That would be a simple, fair way to do it. But, no, the IRS has not chosen that path.
There are other simpler ways of solving this problem, and that is all that we ask. Even the IRS acknowledges that. That is why they have, on their own initiative, delayed and downsized their proposed program.
Mr. Chairman, I yield 5 minutes to the gentlewoman from Connecticut (Ms. DeLauro), my good friend and colleague and cosponsor of this key amendment.
Mr. Chairman, I yield 2 minutes to the gentleman from South Carolina (Mr. Clyburn).
Mr. Chairman, I yield 3 minutes to the gentleman from Massachusetts (Mr. Olver), the ranking member of the subcommittee.
Mr. Chairman, I yield such time as he may consume to the gentleman from Maryland (Mr. Hoyer).
Mr. Chairman, I yield myself the balance of my time to close.
Mr. Chairman, if it is just a little bit of paperwork, if it is not much hassle, if it is easy to comply with precertification, then I would suggest that the gentleman from Oklahoma in the next Congress apply the same rulings and regulations to all of the other taxpayers in this country.
I think the gentleman will find that these paperwork requirements are indeed burdensome, unfair, and are indeed insensitive to the working poor, the folks we should be trying to help in this Congress, as they lift themselves out of poverty, using a Republican-borne program which has helped millions of Americans and their families escape the poverty trap, and it does so by allowing them to avoid the punitive marginal tax rates that the working poor face.
Mr. Chairman, I demand a recorded vote.